How and Why Washington Affects the Real Estate Industry

1. How and Why Washington Affects the Real Estate Industry NAR’s Real Estate Broker Conference Conventional Finance Policy Committee

2. Short Sales: Then and Now Bringing Back Private Capital: Starts with Policy Bulk Sales REO and Notes: What are the details and impact? Eminent Domain and Mortgages: What can REALTORS® do?

3. SHORT SALES • THEN • In the beginning there was short sale… • Seller paid taxes on loss of equity. • Average closing time 18+ months • Lack of training for Brokers winging it • No uniform structure i.e. several different models to comprehend • No singular vehicle of communication • Paperwork often lost or new negotiator and had to start over NOW Today there is a short sale and counting… • Mortgage Forgiveness Debt Relief Act 2007 • Average closing time 6+ months • NAR SFR program and a desired designation with banks and GSE’s • Change in policy with regards to timing more accountability • Platforms developed to monitor progress and store all documentation.

4. NAR ACTION on SHORT SALES Engagement Members have been engaged at every level by actively documenting issues with short sales either with banks, asset managers, appraisers and also the issues home owners face separate from the transaction. NAR also created the SFR designation to provide members education and the public a means to hire an expert. Impact SFR is the preferred designation and short sales though not completely uniformed there is a consistency on the regulatory side especially with the GSEs. Banking will have its own business platform and will commit to the regulatory changes. More deals are getting done and constant member feedback and documentation continues to help this process evolve. Action NAR pushed and held several forums and held meetings with major banks, FANNIE MAE & FREDDIE MAC to discuss streamlining and better policies to ensure some uniformity on the regulatory side.

5. Bringing Back PRIVATE CAPITAL • Issue: • Implicit v. Explicit Guarantee for Fannie & Freddie • Conservatorship: Private Profit – Public Loss • How can the Private Investor compete? Solution: Provide a self-sufficient mechanism whereby safe, sound, transparent, and insured Mortgage Backed Securities (MBS) may be packaged and sold. Chris Read *NAR Presentation, November 2012

6. “Mandatory Elementsfor the Return of Private Capital to the Residential Marketplace” Chris Read *NAR Presentation, November 2012

7. LOAN LEVEL DATA • Issue: • Investors price products based on data • Incorrect and inadequate data leads to reliance on ratings and continued lack of confidence • Solution: • Solid, properly structured loan level data is the foundation needed • Investors want to be empowered and enabled to conduct their own risk analysis Chris Read *NAR Presentation, November 2012

8. LOAN LEVEL DATA Standardized data: real time, accurate and transparent Data: Underwriting Attributes, Loan Performance Attributes, Collateral and Underwriter/Originator Attributes Risk Ratings: continuous and based on real time performance Availability in electronic, manageable industry standards; immediate and continuous risk analysis Chris Read *NAR Presentation, November 2012

9. NAR ACTION on Bringing Back PRIVATE CAPITAL Engagement NAR met with members of the financial services committee as a way to start dialogue about GSE Reform, Regulatory enhancements, and ensuring affordable and realistic mortgage options are available. Impact REALTORS are seeing increased activity and profitability. QM (Qualified Mortgage) has been dramatically changed to ensure a flow of capital. Respectively QRM (Qualified Residential Mortgage) previously had a provision 20% down payment and currently it does not. Members of Congress and the CFPB (Consumer Financial Protection Bureau work with NAR to ensure a healthy market continues. Action Over 11,000 members visited with their members of Congress in May 2013 to educate them and get a commitment from them regarding GSE Reform, discuss the QRM (Qualified Residential Mortgage) down payment provision and ensuring affordable mortgage products are available.

10. PATH Act & Corker/Warner What they say… • Corker/Warner • Set up a National Mortgage Market Utility as a nonprofit platform that develops standards for servicing, pooling, and securitizing residential mortgage loans, as well as serves as a repository for mortgage data • PATH Act • Establishes the FHA as an independent agency and creates the organizational structure of the new agency as an independent government corporation that is fully self-sufficient. • All very familiar with NAR policy points… Corker/Warner a more realistic bill the PATH Act is a mix of good and a lot of bad reviews

11. REO BULK SALES • TRANSACTION HIGHLIGHTS • Create New LLC to transfer properties occupied and vacant • Managing members Pacifica, Cogsville and Colony receive 10% of distributions to LLC and 20% asset management fee from gross rents for the equity interest purchased • Upfront funding by Fannie Mae of Working Capital Reserve and Replacement Reserve • Fannie Mae receives 90% of distributions to LLC then shifts to 50% if certain yield and cashflow thresholds met • None to limited properties can be sold within 3 year period • Transaction timeline 1 year to close FHFA planned for 2,500 properties in the initial pilot. Atlanta, GA still on the table Mabel Guzman *NAR Presentation, November 2012

12. REALTORS® REO SALES • TRANSACTION HIGHLIGHTS • LLC’s are created as needed or currently exist • Asset management fees are only for the duration the property is active and under contract. REALTORS® provide property management as a value add • Funding for repairs on an as needed basis and only during listing period until closing • No waiting, Fannie Mae receives funds whether cash or financed at closing. • Some deed restrictions for Buyer up to 3 months • Transaction timeline 30 to 90 days depending on financing. Fannie is out of the deal there after. REALTORS® closed 141 times more REO properties within same time period of Bulk Sales Mabel Guzman *NAR Presentation, November 2012

13. REO BULK SALES Impact HR 5823 “Saving Taxpayers from Unnecessary GSE Bulk Sale Program Act of 2012” Sponsored by Congressman Gary Miller of California Ceases FHFA of doing more Bulk Sales and recommends for properties to be rented for a 5 year period. The legislation is a reaction to the lack of inventory in California Additionally, Fannie Mae has stopped using outsourcers for their REO properties and working directly with REALTORS®; REO Inventory levels are at the lowest since 2009 Other states, metro markets and sub markets experiencing a shortage of supply Mabel Guzman *NAR Presentation, November 2012

14. BULK NOTE SALES • Enhancements • Focusing on Delinquent Loans vs. Foreclosure; currently all time high of delinquent loans and Foreclosures lowest level • Ramp up Note Sales from 1,800 annually to 5,000 per quarter • Working on solutions for distressed mortgages instead vacant properties • Mitigate negative impact of foreclosures on “Communities” • Two Pools Types; Standard National Pools and Neighborhood Stabilization Pools Enhance Note Sales Program • Highlights • HUD started pilot program 2010 • 2,100 Notes in the single family program sold since 2010 • Foreclosure process delayed by six months • Renaming to “Distressed Asset Stabilization Program” • Borrower receives direct help from servicer Mabel Guzman *NAR Presentation, November 2012

15. BULK NOTE SALES Citigroup Note Sale of $158 million to Carrington Holding Co. and OaktreeCapital Group • Transaction Details • Approximately 500 delinquent loans with average balance of $316,000- • Borrower’s offered modifications or principal write down, prior to giving up title to rent back home • Three year rental agreement for eligible borrowers; must be behind 120+ days to be eligible • Rental program being tested in six markets; Arizona, California, Florida, Georgia, Nevada • and Texas Bank of America offered a rent back program to delinquent borrowers in March 2012 1,000 borrowers in pilot from Arizona, Nevada and New York Those eligible give title to bank and debt forgiven They can rent for up to three years Mabel Guzman *NAR Presentation, November 2012

16. NAR ACTION on BULK SALES Engagement NAR created an REO sub-group to review such sales and discuss issues of capacity, competition, expertise of said groups and impact on municipalities/communities, home owners and members Impact Based on results REO Bulk Sales have ebbed from the GSE’s and banking. Return on investment for distressed assets is generally higher when listed with a REALTOR. Bulk Notes Sales will still continue and with some guarantees that home owners will have an opportunity to have their mortgages modified. Action NAR with member feedback has been monitoring these sales and meeting with key stakeholders to ensure there are rules in place to work with home owners and additionally request capacity plans to establish these companies have the means to organize and run at such high levels

17. EMINENT DOMAIN and Under Water Mortgages Good News there is opposition! The City of Chicago Firmly opposed this measure and any use of eminent domain to usurp any agreements between borrower and financial institutions. Also, San Bernadino, CA. Bad News is… Several Cities are considering this use and they are… Seattle, WA Newark, NJ Irvington, NJ El Monte, CA North Las Vegas, NV

18. EMINENT DOMAIN and Under Water Mortgages Worst News… Richmond, CA Passed it!! MRP, Mortgage Resolution Partners the beneficiaries call the program “CARES” Community Action to Restore Equity and Stability

19. NAR POSITION & ACTION on Eminent Domain • ENGAGEMENT: • NAR has partnered with the following: • American Bankers Association • American Land Title Association • American Securitization Forum • Association of Mortgage Investors • Financial Services Roundtable • Housing Policy Council • Independent Community Bankers of America • Investment Company Institute • Mortgage Bankers Association • National Association of Federal Credit Unions • National Association of Home Builders • Securities Industry and Financial Markets Association ACTION: NAR has shown support to State Associations with funds for the legal battle to educate public. Additionally, they have urged members of U.S. House of Representatives to support an amendment to prohibit FHA from insuring seized mortgages IMPACT: Up to you…

20. NAR/REALTOR WINS!! The GROUND GAME ISSUE: Missouri Legislators seeking new sources of revenue decided to tax every time a property is transferred. ISSUE: The State Fire Marshall wanted to do a change to the Illinois fire safety code. ENGAGEMENT and ACTION: The Illinois Association of REALTORS reached out to members that are key contacts to legislators to call their representatives and make it clear to say NO and not support the Fire Marshall, in addition created a “Call to Action” ENGAGEMENT and ACTION: The Missouri Association of REALTORS started a grass roots campaign to get 157,000- signatures to place an amendment on the ballot for 2010 general election. IMPACT: MAR not only collected 157,000- signatures. They educated the public and voters overwhelmingly by 83% voted against this measure. Missouri has a BAN on this act of double taxation. IMPACT: IAR members pressured legislators and in turn the Fire Marshall withdrew his proposal.

21. Any Questions? Or Your Cool…